Who Needs a Collection Agency License?
North Carolina requires all collection agencies and debt buyers to be licensed at the state level through the North Carolina Department of Insurance (DOI). DOI also regulates and supervises the debt collection industry in North Carolina. Attorneys and law firms, however, do not need to be licensed as collection agencies to engage in debt collection activities.
What Does the Licensing Process Involve?
In North Carolina, new and renewal license applications are submitted online through the North Carolina License Management System (NCMMS). In addition to completing the Collection Agency License application form, you must provide a number of attachments and additional documents, such as:
- A sworn statement describing your collection methods
- A copy of your most recent trust account bank statement used for collection activity
- A certified balance sheet showing that you have a net worth of at least $5,000
All applicants for licensure as a collection agency must also purchase a North Carolina Collection Agency Bondin the appropriate amount:
- $10,000 for applicants domiciled in North Carolina
- $20,000 for applicants domiciled in a state other than North Carolina
- $40,000 for applicants domiciled outside of the United States
These are the bond amounts required when obtaining a new collection agency license. When you renew your license, the DOI will calculate the required bond amount as one-sixth of your total collections minus your earned commissions, with a maximum of $30,000.
The original surety bond must be submitted to the North Carolina DOI in order for your collection agency license application to be considered complete.
Why is a Surety Bond Required?
The purpose of the surety bond is to provide protection for the state and for consumers against financial loss stemming from any unlawful or unethical actions you take in the course of your debt collection activities. The bond serves as your guarantee to conduct business in accordance with all relevant laws and regulations.
How Does It Work?
The surety bond agreement documents what you must do to remain in compliance and avoid claims being filed against the bond. Any violation on your part that causes a financial loss can result in the injured party filing a claim, which you are legally obligated to pay if the claim is determined by the surety bond company to be valid.
Ideally, you will pay any valid claim right away. In reality, the surety company often steps up and pays a claim in advance, on behalf of the bonded individual. This ensures prompt payment of the claim, but it won�t let you off the hook. The legal responsibility for paying any claims against your bond belongs to you, and you alone, so you must reimburse the surety company for such advance payments to claimants.
Understanding How Surety Bonds Work for Collection Agency Licenses
Surety bond companies charge a premium that is a small percentage of the required bond amount. They set the premium rate on a case-by-case basis. This is the amount you will pay�no the total bond amount. The key factor determining your premium rate is your personal credit score. The higher your credit score, the lower the premium rate you will be assigned. If your credit is great, your premium could be as low as 1%.
Get Bonded Today
You can count on our experienced team to get you the best possible deal on the bond you need in order to obtain or renew your license as a North Carolina collection agency. Apply online or by phone with Single Source Insurance today.